Tag Archives: personal injury

5 Tips for Avoiding Personal Injury Claims

According to the Occupational Safety and Health Administration (OSHA), workplace injuries have a major impact on an organization’s bottom line, causing the employer to bear expenses related to workers’ compensation, medical treatment, legal services, repairing damaged property and so on.

Personal injury lawsuits are convoluted, putting your business at a risk of fines and expensive lawsuits. Moreover, personal injury laws differ in every state in terms of the type of injuries they cover and the reimbursements offered.

For instance, the law enables personal injury lawyers in Chicago to cover everything, from the carpal tunnel syndrome in offices to spinal cord injuries on manufacturing and construction sites. Thus, victims of a workplace accident have everything to gain.

Consequently, it is important for business owners to promote an environment of safety and security in the workplace, thereby reducing the total number of personal injury claims.

Here are five effective tips that will help you protect your business from personal injury claims.

1. Pre-empt Workplace Accidents

Accidents in a workplace are erratic and unpredictable. Therefore, it is wise to pre-empt the potential safety risks and implement measures to avoid dealing with the aftermath of an injury episode.

Every business has a unique set of safety concerns that need to be addressed in time. Identify and tackle the safety vulnerabilities for your business and develop strategies to avoid such setbacks.

A business owner is responsible for the maintenance of the office premises and equipment. Hire a building inspector to identify and fix structural issues like loose railings and broken staircases that may lead to accidents. Schedule regular repairs and maintenance to keep your commercial property safe for employees, visitors and customers and protect your business from personal injury claims.
Clutter is a potential safety hazard. Keep high-traffic areas like aisles and stairways free of boxes and waste paper to minimize the possibilities of accidents and falls.

Workplace driving accidents cost employers an average of $60 billion per year. Make sure all vehicles used for business purposes are thoroughly inspected, repaired and maintained on a regular basis to avoid any accidents in transit.

Do not encourage overtime working. More often than not, overworked employees suffer from mental and physical exhaustion, increasing the chances of workplace accidents and injuries. Make sure you have adequate staff to improve the productivity and maintain a safe work environment for all.

See also: When Workplace Safety Is Core…  

2. Create a Successful Employee Safety Program

According to OSHA, educating employees about accident and emergency response and other safety measures can reduce workplace injuries and disabilities by as much as 60%.

Conduct pre-employment tests to screen the most efficient, skilled and qualified individuals for the job. Train your workforce to follow safety practices and identify, report and effectively manage site-specific hazards, thereby empowering them to make safe choices.

Analyze your workplace for safety hazards and take effective steps to eliminate or control them. If you operate in the heavy machinery, construction or hazardous chemicals domain, make sure your workforce is using the proper safety equipment and protective gear.

In an office environment, make sure the housekeeping staff keeps the aisle free of debris and spills, reducing the risk of falls. Moreover, follow the ergonomic workplace standards that promote employee productivity, safety and well-being.

Routine safety and evacuation drills prepare employees for dealing with natural calamities like tornadoes, earthquakes and fire. It is critical to reinforce the safety measures at all employee meetings and training sessions.

Encourage a culture of safety by stressing the importance of complying with safety standards, thereby reducing the risk of workplace accidents and protecting your business from personal injury claims.

3. Invest in General Liability and Property Insurance

When accidents occur at the workplace, the injured employees, customers or visitors can easily file a personal injury lawsuit, imposing heavy fines on the business and damaging its reputation. Investing in liability insurance, however, can alleviate the financial burden of these lawsuits and maximize security for your business.

Thus, when faced with personal injury claims of negligence, property damage, libel, slander and advertising injury, you can rely on general liability insurance to protect your business against such claims and cover your legal fees and the medical and miscellaneous expenses.

To protect your company’s building and physical assets against fire, theft and accidental damage, it is advisable to invest in a liability insurance policy that includes property insurance.

4. Hire an Expert Business and Commercial Litigation Attorney

Personal injury claims not only cost the business money but also put its reputation at stake. Whether you own a small or a medium-sized enterprise or a large organization, it is critical to hire a business and commercial litigation expert who can offer you valuable insights when signing contracts and settling claims.

Personal injury lawyers know the personal injury claim process like the back of their hands and are updated on the latest health and safety laws. Thus, they can effectively represent you in court and advise you on the next steps, thereby ensuring that your business is adequately protected against such claims.

5. Know What to Do Once an Accident Has Occurred

Despite safety precautions, workplace accidents do occur, resulting in personal injury claims against the employer. When an accident occurs in your business premise, injuring one or more employees, you should know how to handle the situation.

First things first, seek emergency help for the people involved in the accident. Secondly, get in touch with your attorney, who can help you manage this situation in a professional manner.

Investigate the sequence of events that led to the mishap and record it in the form of pictures and videos. Ask the employees who witnessed the incident to give you a recorded statement about the accident and remember to note their names and contact details.

See also: Workplace Wearables: New Use of Big Data  

Take Home Message

As a business owner, you should always be prepared for dealing with all unexpected events, including workplace injuries. Because personal injury claims severely damage the company’s reputation and eat into its bottom line, the best defense is to take pre-emptive, preventative steps toward minimizing the incidence of workplace accidents, thereby securing the business from such risks.
The information shared in this post will help you create a safe work environment for your employees and protect your business from pricey personal injury claims.

He Who Sits On His Rights Loses Them

Never Ignore the Statute of Limitations
The Wisconsin Court of Appeal was called upon to resolve a dispute over the application of a statute of limitations in a suit against American Family Mutual Insurance Company, Gage Creighbaum, Sherry Lagios, and Dimitrios Lagios (the “defendants”) who appealed an order denying their motion to dismiss. The trial court held that the defendants waived their statute of limitations defense by not raising it prior to filing their notice of appearance and serving their request for admissions in response to Maas’ amended complaint. In Justin M. Maas v. American Family Mutual Insurance Company, Gage M., No. 2011AP1661 (Wis.App. 08/01/2012) the Wisconsin Court of Appeal resolved the issue.

On August 20, 2007, Creighbaum crashed his vehicle into a vehicle operated by Maas, resulting in personal injury to Maas. On August 18, 2010, two days before the end of the three-year statute of limitations period, Maas filed a summons and complaint against the defendants related to his injuries. Maas failed to serve any of the defendants with the summons and complaint.

Maas filed an amended summons and complaint on February 15, 2011, which he served on the defendants. The amended summons and complaint contained the same cause of action and named the same defendants as the original summons and complaint. The defendants filed an answer to Maas’ amended summons and complaint alleging Maas failed to obtain proper service of process on Creighbaum and the Lagioses and the court therefore lacked personal jurisdiction over them and alleged that Maas’ claim was barred by the statute of limitations.

The trial court denied the motion, concluding that the defendants’ failure to raise their jurisdictional objection prior to filing the notice of appearance and serving the request for admissions constituted a waiver of their statute of limitations objection. The court further held that Maas’ action was properly commenced and that the amended complaint related back to the original complaint.

On appeal, the defendants argued that even though Maas filed his original summons and complaint two days prior to the running of the three-year statute of limitations period, his claim is barred because he failed to serve any of the defendants with the summons and complaint within ninety days of the filing as required by Wisconsin statutes.

The Wisconsin Court of Appeal concluded that the statutes are clear. An action to recover damages for personal injuries shall be commenced within 3 years or be barred. An action is commenced as to any defendant when a summons and a complaint naming the person as defendant are filed with the court, provided service of an authenticated copy of the summons and of the complaint is made upon the defendant within 90 days after filing. Thus, if service is not made within ninety days of the filing of the summons and complaint, the action is not commenced. If not commenced within the three-year statute of limitations period, the action is barred.

It was undisputed that Maas failed to serve any of the defendants with the original summons and complaint within ninety days of filing. Wisconsin procedure requires, therefore, that the court conclude his action was never commenced prior to the running of the limitation period and is therefore barred.

Maas’ failure to serve the defendants with the original summons and complaint within ninety days was a fundamental defect which deprived the trial court of personal jurisdiction over the defendants and rendered the original pleading a legal nullity. The trial court conclusion that the defendants waived their jurisdictional objection by failing to raise the objection when they filed their notice of appearance and served their requests for admissions in response to Maas’ amended pleading fails since there was nothing for the defendants to waive.

Maas’ failure to serve the defendants with the original summons and complaint within ninety days resulted in the three-year statute of limitations period expiring without an action having been commenced. The failure was a fundamental defect which rendered the pleading a legal nullity and could not be remedied by the subsequent filing of an amended pleading after the statute of limitations period expired.

Statutes of limitation were designed to protect people against stale claims because, if suit is not filed promptly, memories fade and witnesses can move away from the jurisdiction. Parties and lawyers that wait until the last moment to sue are taking a chance of losing those rights because of their sloth. Mr. Maas is not without a remedy, however, because his lawyer’s failure to serve the defendants within the 90 days allowed by statute might allow for a case against the lawyer for failing to act within the custom and practice of lawyers in his community.

Although the waiver argument was original and successful in the trial court it did not stand up to scrutiny since no one can waive a nullity nor can a cause of action be created by waiver.

The Insurance Implications Of Social Networking Websites, Part 2

This is the second part of a six part series of articles discussing insurance coverage for claims that can be brought against individuals or companies because of the use of Social Media websites. Additional articles in this series can be found here: Part 1 and Part 3.This article discusses coverages potentially triggered under Coverage B — Personal and Advertising Injury and any applicable exclusions.

Personal Injury Offenses Covered In Commercial General Liability And Homeowners Policies
Most Commercial General Liability policies contain Coverage Part B that provides coverage for personal and advertising injury. Some homeowner and renters policies, but not all, provide coverage for personal injury. Carefully review the policy to determine if it does provide personal injury coverage. If not, then coverage must still be analyzed under Coverage Part A for bodily injury coverage, which will be discussed in part three of this series.

The definition of “personal injury” is typically:

13. “Personal and advertising injury” means injury including consequential “bodily injury” arising out of one or more of the following offenses:

a. False arrest, detention or imprisonment;

b. Malicious prosecution;

c. The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies committed by or on behalf of an owner, landlord, or lessor;

d. Oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services;

e. Oral or written publication, in any manner, of material that violates a person's right of privacy;

f. The use of another's advertising idea in your “advertisement” or

g. Infringing upon another's copyright, trade dress, or slogan in your “advertisement.”

The policy may contain additional offenses or endorsement that modifies the definition of “personal injury.” However, typically only subsections d (libel/slander) and e (invasion of privacy) are typically implicated when a claim is presented for claims related to social media.

To trigger “personal injury” coverage, the complaint must arguably allege a claim that constitutes at least one of the offenses listed in the policy. The policy does not provide coverage for other torts alleged in the complaint that do not constitute specifically enumerated offenses contained in the definition of “personal injury,” but that may bear some similarity to those offenses listed in the policy. There is no coverage if the complaint does not allege or the plaintiff does not recover for an enumerated offense.

There may still be coverage under the policy for a claim asserted in the Complaint that alleges a non-enumerated offense so long as it occurred during the course of an enumerated offense.

In Western Cas. & Sur. Co. v. International Spas of Ariz., 130 Ariz.76, 634 P.2d 3 (1981), for example, the insured had leased a portion of its premises for the operation of a beverage service. The insured had terminated the lease and excluded the lessee from the premises. The lessee sued the insured for breach of the lease, conversion of personal property, conspiracy to interfere with business and contractual relationships, and imposition of a constructive trust. The insured sought “personal injury” coverage under a Commercial General Liability policy, arguing that the lawsuit alleged a wrongful eviction even though no such claim was asserted.

The carrier argued that the policy only provided coverage for wrongful evictions of patrons to the insured's facilities and not the wrongful eviction of its customers (i.e., lessees). The Arizona Supreme Court rejected this contention and stated that the policy contained no such restriction limiting liability. Instead, the Supreme Court held that the carrier had an initial duty to defend because two of the counts (conversion and interference with business relations) alleged torts committed during the course of the alleged wrongful eviction.

In the social media context, a complaint may not specifically allege an invasion of privacy or a defamation claim, but alleges that the defendant intentionally or negligently inflicted emotional distress when it published defamatory comments about the plaintiff. Under those circumstances, the policy may provide coverage because the emotional distress claim, although not an enumerated offense, occurred during the course of an enumerated offense; namely, defamation or invasion of privacy. A similar analysis would apply if the complaint alleges an intentional interference with business relationships claim that arose out of the publication of defamatory materials or material that invades the privacy of an individual.

Some policies contain the enumerated offense “outrageous conduct,” but may not define what constitutes the offense of “outrageous conduct.” A savvy insured's attorney may argue that because the term “outrageous conduct” is undefined, it is ambiguous and should be construed against the carrier to provide coverage for the social media claim; more specifically, that the conduct of posting any comments, pictures, videos, or other items on the Internet is outrageous. Some jurisdictions have held that the lack of a definition of an operative term in a policy does not necessarily render the term ambiguous. In determining whether a policy term is ambiguous, a court may first examine the purpose of the term or phrase, public policy considerations, and the purpose of the transaction as a whole and also construe the policy's provisions according to their plain and ordinary meaning.

The term “outrageous conduct” is defined by Black's Law Dictionary as “Conduct so extreme that it exceeds all reasonable bounds of human decency. See EMOTIONAL DISTRESS.” Black's Law Dictionary also defines “emotional distress” as follows:

A highly unpleasant mental reaction (such as anguish, grief, fright, humiliation, or fury) that results from another person's conduct; emotional pain and suffering. Emotional distress, when severe enough, can form a basis for the recovery of tort damages. — Also termed emotional harm; mental anguish; mental distress; mental suffering. See INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT INFLICTION OF EMOTIONAL DISTRESS. Cf. mental cruelty under CRUELTY. [Cases: Damages 48-56.20. C.J.S. Damages §§ 94-104; Parent and Child § 344; Torts §§ 66-83.]

Thus, the offense of “outrageous conduct” involves the infliction of mental distress. Indeed, the term “outrageous conduct” is a legal term of art that refers to a claim typified by the Restatement (Second) of Torts § 46. Various courts have concluded such, albeit in the non-social media context. See, e.g., Hines v. Hills Dept. Stores, Inc., 454 S.E.2d 385, 390 (W. Va. 1994) (“Our review of the case law discussing the tort of outrageous conduct illustrates that it is a difficult fact pattern to prove. A certain level of outrageousness is required, as explained in the Restatement (Second) of Torts….”); Kelly v. Resource Housing of Am., Inc., 615 A.2d 423, 426 (Pa. Super. 1992)(“The tort of outrageous conduct causing severe emotional distress is outlined at the Restatement (Second) of Torts, § 46….”); LaBrier v. Anheuser Ford, Inc., 612 S.W.2d 790, 793 (Mo. Ct. App. 1981)(“Missouri has recognized the tort of outrageous conduct as defined by § 46 of the Restatement (Second) of Torts”).

Whether posting inappropriate comments, pictures, videos, etc. constitutes outrageous conduct is probably a factual issue that will not be addressed in this article. Suffice it to say that in reviewing policies, attorneys, adjusters, and insureds should be careful to review the actual offenses listed, review the relevant case law addressing those enumerated offenses, and any legal or common dictionaries that may define such phrases before making a determination whether the social media claim may be covered by the policy.

Hospital Cost Shift

A big decline in both auto accident and severe injury frequency has not produced a corresponding decline in loss costs. The slack has been taken up by inflated soft tissue injury claims fueled by hospital cost shift. Financially savvy hospital administrators and new software that “enhances” billing techniques have overcome claim deterrents so effectively that the industry seems unaware. There is an answer, but the industry may be satisfied with the status quo for now.

A 2008 report by the Insurance Research Council (IRC) provides empirical evidence that since 2000, a significant decrease in auto claim frequency has been mysteriously offset by an equally significant rise in severity, leaving loss costs essentially unchanged. Of particular note, the Insurance Research Council report points to a study by the National Safety Institute showing that improved automobile safety engineering has been lowering the frequency of serious injuries and deaths. This makes the rise in bodily injury and personal injury protection claim severity particularly vexing.

The graph below is taken from the Insurance Research Council report and it depicts the described trends:

Percentage Change in Countrywide Claim Frequency, Claim Severity, and Loss Costs

This paper is the result of research that was aimed at discerning the root causes of the three simultaneous trends and whether their relationships are coincidental or causal.

In summary, the findings were as follows:

  1. The decline in claim frequency was (is) primarily causally related to lower per-capita driving, which in turn is causally related to the combination of a significant rise in gasoline prices coupled with rising unemployment over the same period.
  2. The rise in property damage severity is largely causally related to an increase in vehicle repair and replacement costs that is in turn driven by the efforts to make vehicles safer, such as airbags.
  3. The rise in bodily injury and personal injury protection severity is the result of a significant shift of the total cost of national health cost burden from the government and private health insurers to the Property & Casualty insurance industry.

The Root Cause Of Medical Cost Shifting
The decline in claim frequency and the rise in property damage severity were considered transparent enough not to warrant further elaboration in this article. This turned our focus to unraveling the seemingly mysterious rise in bodily injury and personal injury protection severity, especially in light of the decline in the rate of severe injuries that can be causally related to the property damage severity rise.

Our findings in this regard are a confluence of causally related phenomena as follows:

  • The government has been tightening payment controls and cutting reimbursement rates for medical providers under programs like Medicare and Medicaid.
  • Private health coverage payments to providers have declined as fewer employers provide coverage; for those who do, the deductibles and co-payments have grown considerably.
  • Hospitals and other significant medical entities have responded by appointing financially savvy administrators and implementing electronic medical record systems that have morphed from being efficiently focused to being revenue enhancement driven.
  • These savvy administrators and their new software programs are defeating the government and private software tools designed to vet electronic billing submissions. They accomplish this via “diagnostic upcoding,” a means of reporting an injury or illness as being more severe than in actuality.
  • Though these tactics are aimed primarily at the government and private health plans, they have worked equally well at overcoming Property & Casualty company claim deterrents, driving up the cost of what were once considered small soft-tissue personal injury protection and bodily injury claims.
  • While the tactics are effective against the government and private health insurers, those entities have mitigated their effects by lowering medical procedure reimbursement rates. Because the Property & Casualty industry lacks the means to do the same, it is absorbing an ever increasing share of total national health care costs, a phenomenon referred to as “cost shifting.”

Understanding Diagnostic Upcoding
The rise in bodily injury and personal injury protection severity is the manifestation of the growing cost shift from hospitals and other medical providers that are passing a progressively greater percentage of the total cost of national medical costs to the Property & Casualty industry.

In many ways, this shift is an unintended consequence of a financial stalemate between the government and private health insurers on one side and hospitals and other medical providers on the other. Hospitals and other providers turned increasingly to upcoding to offset the steadily decreasing reimbursements from the government and private health. But the Property & Casualty industry, which accounts for only about 10% of hospital utilization, was subjected to those same programmed upcoding schemes, seemingly without awareness, or at least without taking mitigating actions.

It is evident that something is driving the increase in medical care costs

The following are direct quotes from the IRC (emphasis added):

“We use the following indicators and more: extent of disability, rate of hospitalization, days unable to perform duties. And we see that injuries are not becoming more serious nor have they changed much. But, it is still evident that something is driving the rise in severity. Since injuries do not appear more serious, medical usage and treatment costs are driving the increase in medical care expenses.

“Low reimbursements from public health insurance programs, such as Medicare and Medicaid, have prompted hospitals to shift costs to automobile insurance companies — raising auto injury claim costs. Cost shifting in 2007 resulted in $1.2 billion in excess hospital charges. The full impact of hospital cost shifting, including that occurring in other insurance coverage, is likely much greater.

Medical Coding 101
The medical profession has a well-established regimen of coding to describe both the nature of injuries and illnesses as well as the therapies utilized to treat them. The coding classification that defines the nature of pathology, the diagnosis, is referred to as “ICD-9 codes.” For therapies, the codes are referred to as “CPT and HCPCS codes.”

ICD-9 codes form the basis for CPT and HCPCS codes because the diagnosis precedes the selection and introduction of the appropriate therapy or therapies. So if in the same instance the ICD-9 code indicated a bruised hand but the CPT/HCPCS code reflected a coronary bypass, software programs employed by the government, private health care providers and the Property & Casualty industry can detect the mismatch and prevent the payment.

The government and private health insurers tie their reimbursement rates to the CPT/HCPCS codes. When the therapy code is correct for a particular diagnostic code, the software can discern the appropriate payment amount based on a programmed fee schedule. With such a system, it is easy for the government to institute an across the board fee reduction of 10% or to apply the reduction in a variable way and accurately estimate its aggregate impact.

The Property & Casualty insurance industry is able to follow government fee schedules in some instances (mainly Workers' Compensation) but in most states relies on “usual and customary” charges for auto, the aggregate average of what medical providers bill for each CPT/HCPCS code. There has been significant controversy and litigation related to the sources of the “usual and customary” data.

Overall the government, private health care and the Property & Casualty industry all use software programs to vet medical billing that start by insuring that the CPT/HCPCS coding for each therapy match the ICD-9 diagnostic code and then, checking the amount charged for each therapy against a fee schedule or, for the Property & Casualty industry, the “usual and customary” charge.

From “Patient Centered” to “Profit Center”
The belief that doctors would not falsely inflate a diagnosis, outside of outright fraud, was common at the outset of the electronic vetting system, and with good reason. But the confluence of government fee reductions and the decline of private health care created significant financial duress for hospitals and providers. Something had to give, and turning away the uninsured was not an option, although more and more providers are opting out of Medicare and Medicaid.

That answer came in the form of savvy hospital administrators and slick new software that added efficiency but even more so, drove up revenues. It did so by making certain that the highest legitimate diagnostic code was being selected. It also provided upfront audits to spot instances such as a therapy that overshot the initial diagnosis so that “coding corrections” could be made before the billing process was invoked. Increasingly, such corrective activity was administered by support personnel who lacked medical knowledge and sought only to satisfy the systems requirements.

The Impact Of Diagnostic Upcoding
The medical coding system is logical and it lends itself well to automation, which vastly increases efficiency for everyone. But its cornerstone is the ICD-9 diagnostic code and while expert systems can aid a doctor in making a diagnosis, the ultimate decision (at least for now) still rests with the doctor's judgment.

With enough information, a system could flag potential upcoding in certain instances. Gradually such a system will evolve and become increasingly effective, but for now, expert human intervention is required to decide whether the reported ICD-9 diagnostic code is reasonable in light of numerous data points derived from a forensic examination of the mechanism of injury.

This chart reflects a huge shift in ICD-9 supported CPT coding from 2002 to 2008:

Increase in Emergency Department E/M Billing Levels

Most Doctors Are Victims Not Perpetrators
It should be noted that hospitals and other providers were likely losing legitimate revenues by not paying sufficient attention to billing practices in the past. Therefore, some of the change in the above chart is likely justified. But like a pendulum that may have swung too far in one direction in the past, there is ample evidence of over-compensation on its way back.

A Few Recent Headlines

4-18-2011: CtW Investment Group Calls for Board Accountability

7-21-2011: Prime Healthcare Accused of Medicare Fraud

8-31-2011: Alleged Fraud Uncovered During EMR Training

9-12-2011: Dallas Hospitals To Pay $1.4M, Settle Upcoding Investigation

9-21-2011: Doctors Protest CEO at Knapp Medical Center

This is not meant to suggest that all hospitals and providers, or even the majority, cross the line, but a systemic change has occurred and one manifestation is the alarmingly frequent allegations of billing related maleficence.

Examples Of Recent Articles From Hospital Industry Publications:

Examples Of Recent Articles From Hospital Industry Publications

The Property & Casualty Industry Response
Had cost shifting not occurred in parallel with the significant decline in accident frequency, loss costs would have dropped and companies would have utilized the capital windfall to lower their prices and gain market share. That would have led to a significant decline in premiums accompanied by expense reductions significant enough to maintain underwriting and claim expense ratios.

Many of the financial incentives in the industry are determined as a percentage of premiums. Shrinking premiums produce shrinking companies, lower cash flow, weakening balance sheets and endangered financial ratings. None of those are desirable outcomes for carriers. Independent Agents and Brokers work on commission, a percentage of written premiums, so if they earn 15% on an $800 auto policy that without cost shifting may have shrunk to a $600 policy, they would have taken a 25% revenue cut.

There may be Nash equilibrium in play, with everyone being happy under the current circumstances. But as the Insurance Research Council points out, if accident frequency returned, first loss costs, and then premiums would spike. The longer and larger the cost shift is allowed to grow, the greater the potential market disruption becomes when the day of reckoning arrives. But for anyone who is not betting on a near term economic revival, and/or the significantly lowered gasoline prices that could fuel increased frequency, this may not be a burning issue.

Is Anybody Hurt By Cost Shift?
Auto insurance consumers are financing the cost shift through artificially high insurance premiums. To the extent that some of those same individuals consume more medical services than are paid for, there seems to be fairness. But for those who shoulder the full burden (or more) of their medical expenditures, “the affluent,” this resembles income redistribution.

What Does This Portend For Claims?
As things stand, most claim department leaders either don't realize what has happened, or believe that their particular policies and practices have prevented this for their company. A benchmark comparison of company loss costs against like competitors would force one to choose to either disbelieve the phenomenon entirely or accept that they are as vulnerable as everyone else.

The standard industry claim deterrents for medical cost containment are two software programs, medical bill repricing and automated bodily injury evaluation. Both are highly susceptible to diagnostic upcoding, but few claim leaders understand the algorithms that drive these systems and imbue them with capabilities that they don't have. Those claim people far enough into the details to know better are not empowered to act.Efforts to inform claim leadership typically meet with stiff resistance, because they genuinely believe that they “have it covered.” And even if they knew they did not, why would they want to have such significant leakage called out when loss ratios are stable, and nobody is pointing a finger in their direction? But acknowledging and addressing the issue would create more work on top of what already feels insurmountable.

Closing Thoughts
This article was written for the purpose of calling out the significance of cost shifting to the industry. I do not believe that the industry is purposely allowing the cost shift, but when a bad situation creates comfort, a sense of urgency is elusive. The more entrenched the problem becomes, the more difficult the exit strategy.

The Property & Casualty industry will continue to represent a relatively small percent of hospital utilization, but it is continuing to pay a growing disproportionate share of the total cost. Even if driving never perks up again, as the cost shift grows a tipping point nears where premiums become too high.

Finally, there has been too much focus on automating claims over the past twenty years or more and far too little focus on basic claim handling. This is one example of numerous significant pockets of leakage that arose as a result.